Question
The green division of Campana Company reported the following data for the current year: Sales $2,964,000 Variable costs 1,956,240 Controllable fixed costs 592,800 Average operating
The green division of Campana Company reported the following data for the current year:
| Sales | $2,964,000 | |
| Variable costs | 1,956,240 | |
| Controllable fixed costs | 592,800 | |
| Average operating assets | 4,940,000 |
Top management is unhappy with the investment centres return on investment. It asks the manager of the green division to submit plans to improve the ROI in the next year. The manager believes it is reasonable to consider each of the following independent courses of action.
| 1. | Increase sales by $494,000 with no change in the contribution margin percentage. | |
| 2. | Reduce variable costs by $148,200. | |
| 3. | Reduce average operating assets by 4%. |
(a) Calculate the return on investment for the current year. (Round ROI to 1 decimal place, e.g. 1.5%.)
| Return on Investment | -------- | % |
(b) Using the ROI formula, calculate the ROI under each of the proposed courses of action. (Round ROI to 1 decimal place, e.g. 1.5%.)
| Return on investment | |||
|---|---|---|---|
| Action 1 | ------ | % | |
| Action 2 | ------- | % | |
| Action 3 | -------- | % | |
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
15th Edition
978-0256168723, 77388720, 256168725, 9780077388720, 978-007337960
